Meet The Patent Troll Suing Hundreds Of Companies For Encrypting Web Traffic

from the the-system-is-broken dept

Mon, Nov 12th 2012 5:21am — Mike Masnick

Ars Technica has the story on yet another patent troll -- though this one seems a bit special. TQP Development -- a typical patent troll in so many ways -- has apparently gone on something of a rampage over the last four years (and increased in the last year) suing hundreds of companies. The list is impressive. Its most recent lawsuit is against Intel and Wind River, but it's sued pretty much everyone you can think of. Apple, Google, Twitter and eBay? All sued. Target, Hertz and Mattel? Yup. The list goes on and on... and the company is able to get a bunch of companies to settle just to get rid of the lawsuit. Apparently not a single lawsuit has actually gone to trial.

The patent in question, 5,412,730 is quite simple, with just two claims:

1. A method for transmitting data comprising a sequence of blocks in encrypted form over a communication link from a transmitter to a receiver comprising, in combination, the steps of:
providing a seed value to both said transmitter and receiver,
generating a first sequence of pseudo-random key values based on said seed value at said transmitter, each new key value in said sequence being produced at a time dependent upon a predetermined characteristic of the data being transmitted over said link,
encrypting the data sent over said link at said transmitter in accordance with said first sequence,
generating a second sequence of pseudo-random key values based on said seed value at said receiver, each new key value in said sequence being produced at a time dependent upon said predetermined characteristic of said data transmitted over said link such that said first and second sequences are identical to one another a new one of said key values in said first and said second sequences being produced each time a predetermined number of said blocks are transmitted over said link, and
decrypting the data sent over said link at said receiver in accordance with said second sequence.
2. The method as set forth in claim 1 further including the step of altering said predetermined number of blocks each time said new key value in said first and said second sequences is produced.

Got it?

Of course, the patent actually expired back in May (17 years after it was granted), though the company is still suing, since there's a "look back" period of six years, and the company apparently intends to use as much of the next six years as it can getting people to pay up for encrypting their web traffic. Can anyone explain how this is a reasonable system?

What Ars leaves out of the story is that TQP is part of a much larger operation. TQP is one of Erich Spangenberg's companies -- he has hundreds of different patent trolling operations, and even had to pay a huge fine a few years back for shuffling around patents between companies and suing DaimlerChrysler twice over the same patent, even though the original settlement promised he wouldn't sue them over the same patent again. He's also the guy who got smacked down after sending "anonymous" threat letters in which he would not name the client or the patents -- but demanded the company he reached out to first sign a gag order to even find out what the patent was.

Spangenberg has also proudly stated that his mantra is "sue first, ask questions later," which might explain the hundreds of cases filed by TQP.

Andy Greenberg at Forbes actually got Spangenberg on the phone where he tried to defend TQP's actions:

“When the government grants you the right to a patent, they grant you the right to exclude others from using it,” Spangenberg says simply when I reach by phone him in his Dallas office. He makes no apology for the fact that TQP doesn’t use the encryption patent itself, or even have a website. “If you buy a hundred-foot lot in the middle of Manhattan, you’re not required to develop it…Companies have the right to protect their IP dollars.”

Greenberg also points out that many of TQP's lawsuits refer to sites that encrypt with the RC4 algorithm -- and RC4 predates the patent by two years. Apparently, despite other claims against various websites that use RC4, Spangenberg changes his story:

But when I point out to Spangenberg that RC4 was invented by MIT cryptographer Ron Rivest in 1987, two years before the filing date of TQP’s patent, he counters that defendants’ infringement actually has nothing to do with RC4. Instead he claims the infringement lies solely in the use of the SSL or TLS “handshake” that establishes a secure connection between a web browser and a web server, a technology invented in 1994 and used by virtually every secure web page.

Greenberg notes that basically the entire internet uses SSL or TLS for security these days, and Spangenberg, ridiculously, claims it's because of how great the "invention" in the patent is.

There's a lot more in Greenberg's interview, including Spangenberg trying to claim that the patent is valid, in part because famed security expert Bruce Schneier was "advising" him when they got the patent. But Schneier tells Greenberg a very different story:

Schneier says he worked with Michael Jones on a technology related to secure payment systems in the 1990s. But since Jones’ work was acquired by TQP and used for lawsuits, he’s actually consulted to a half-dozen defendants in Spangenberg’s cases, many of whom settled for undisclosed sums rather than risk an expensive trial.

Schneier describes TQP as a “really bad patent troll” and the intellectual property it’s using to cudgel defendants as a “crappy patent” that ought to be invalidated by prior art–evidence of previous invention of the same technology.

But, of course, none of that matters when there are hundreds of companies to shake down...

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Filed Under: encryption, eric spangenberg, patent trolls, patents
Companies: tqp

44 Comments

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Anonymous Coward, 12 Nov 2012 @ 5:32am

Time to send in the IRS, it worked against Al Capone.
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gorehound (profile), 12 Nov 2012 @ 5:40am

Re:
Agreed ! This man is scum and he needs to have one huge bad day.
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G Thompson (profile), 12 Nov 2012 @ 5:49am

I read the description of the patent:
1. A method for transmitting data comprising a sequence of blocks in encrypted form over a communication link from a transmitter to a receiver comprising, in combination, the steps of: [...]

and my immediate thought was damn I've just gone back in time to Germany in the 1920's where we are talking about the Enigma machine invented by Arthur Scherbius.
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Anonymous Coward, 12 Nov 2012 @ 5:51am

Simple solution: Prove that other people using you patent are actually hurting your operation, i.e. you're actually using the patent for something unique in your own work. Since TQP does NO work whatsoever that should get rid of most of the trolls...
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Anonymous Coward, 12 Nov 2012 @ 5:53am

Re:
Or maybe someone should patent patent-trolling....
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eclecticdave (profile), 12 Nov 2012 @ 5:54am

Time dependent?
new key value in said sequence being produced at a time dependent upon a predetermined characteristic of the data being transmitted over said link

I don't think TLS handshakes do anything like this, do they?
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That One Guy (profile), 12 Nov 2012 @ 6:06am

Something like this perhaps?
'...a method for extorting money from companies that actually produce things, via a method of abuse of the legal system and threats who's scope make the demands of Dr. Evil look rational and sane...'
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That One Guy (profile), 12 Nov 2012 @ 6:08am

Re:
Didn't they nail Capone for tax evasion though? Seems to me that as long as the extortionists are paying their taxes, the IRS probably doesn't, and wouldn't, care either way.
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The eejit (profile), 12 Nov 2012 @ 6:21am

Re: Re:
Tax Evasion was a method in the door to the "Untouchable" Capone.
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Josef Anvil (profile), 12 Nov 2012 @ 6:26am

Note the difference
�If you buy a hundred-foot lot in the middle of Manhattan, you�re not required to develop it�Companies have the right to protect their IP dollars.�

This is the biggest difference between physical property and IP. Scarcity creates value. If you buy a lot in Manhattan and decide not to develop on it for 20 years, you end up with a lot of money due to appreciation. If you do nothing with a patent for 20 years, it expires and has almost no monetary value.

Patents are not a right to withhold innovation from the world, they are a right to a limited monopoly in EXCHANGE for sharing your invention with the public.

Maybe we should start treating physical property like IP, so anyone should be allowed to pay a license fee that allows them access to a others' homes.
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Ed C., 12 Nov 2012 @ 6:36am

Barking up the wrong tree
Maybe big companies like Google program there own encryption apps for their servers, but most don't, they just buy them off the shelf. If anyone is infringing, it's the company that made the app, not the users.
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Ed C., 12 Nov 2012 @ 6:37am

Re: Note the difference
Maybe we should start treating physical property like IP, so anyone should be allowed to pay a license fee that allows them access to a others' homes.

Um, it's called "rent".
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out_of_the_blue, 12 Nov 2012 @ 6:49am

Oh, you want to be reasonable?
"Can anyone explain how this is a reasonable system?"

Well, Mike, what you "free market" types never get is: capitalism is NOT reasonable. It's dog-eat-dog, grab all you can and to hell with everyone else. There's nothing intrinsic in "capitalism" that measures worth and doles out rewards proportional to merit, nor anything that prevents outright stealing of the unearned. It's just another form of plutocracy where those that have get more and the have-nots get less.

"Reason" has to be deliberately put into "natural" systems. In the formerly (reasonably) capitalistic USA, that was done by progressive tax rates up to 90% on The Rich. Reagan took the limits off The Rich (especially by reducing "capital gains" rates) while working people didn't actually see an effect, and ever since, wealth has been re-distributed from poor and middle class to The Rich. That's direct correlation, as is that civil liberties have been weakened ever since. -- So, what's needed is Steeply Progressive Income Taxes (SPIT) that'd pretty much affect only The Rich, as that system quite "reasonably" began. Catchphrase: SPIT on The Rich.

Now, tying to topic: tax the hell out of unearned income from patents and this evil too will be greatly reduced. Source of income matters, that's why the former distinction of "unearned" at different and higher rates than wages.
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Anonymous Coward, 12 Nov 2012 @ 6:56am

Re: Oh, you want to be reasonable?
You were so so close to being coherent. Keep trying!
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The Real Michael, 12 Nov 2012 @ 6:59am

Re: Note the difference
To regulate the arts, science, technology and ideas gives the government, corporations and private entities extraordinary control and entitlement, including the ability to suppress the public, attack free speech, put a lock on ideas and threaten people with legal action.

If copyright, trademarks, patents and IPs were really intended for the benefit of the public, things like patent trolls, website seizures, extortion schemes and a monopoly on culture and ideas wouldn't exist. Yeah, because nothing says "promoting the arts and science" quite like the justice system allowing one party to reach into another's pockets for an easy money grab.
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Michael, 12 Nov 2012 @ 7:06am

Re: Oh, you want to be reasonable?
"tax the hell out of unearned income from patents and this evil too will be greatly reduced"

This is clearly treatment of a symptom rather than fixing the problem. Also, unless you redirected this tax revenue specifically back to the companies that incurred the expense, it is merely a punishment.

Also, how do you define "unearned income from patents" and then how do you tax it? If someone didn't earn any income, would they be suffering from a lack of money to pay the tax? How do you scale that up? You SHOULD have earned $10 million from this patent (because we have a chart that says so), but you earned nothing. So, we need to tax you on the lost $10 million.

($10,000,000 - $0) * .75 = a bunch of money you don't have?

Well, I suppose it may solve the problem - who could risk patenting anything - if your business fails, you owe taxes on the money you didn't make.
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Shotsie, 12 Nov 2012 @ 7:14am

Re: Note the difference
Even better - imagine the taxes and insurance on that 100 foot strip - these expenses really "force" development to occur - a developer would go broke trying to just hold onto vacant, non-rent producing property (properly so....)

So, why not impose a yearly fee for holding onto a patent? And a transfer fee for selling a patent? At the very least, the owners of the patents would be known for the entire life of the patent, and any stupid patents would be abandoned.

I also believe that patents need to be broken into trademarked ideas with a shorter life span of maybe 7 years (when the patent holder doesn't develop the idea into a commercial product) and product patents. Different fees would apply.
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The Real Michael, 12 Nov 2012 @ 7:16am

Re: Re: Oh, you want to be reasonable?
Just a thought: Maybe if we didn't outsource so many jobs, Wall Street didn't speculate and Washington didn't spend so much, especially on wars, our economic situation would improve dramatically.

Yes, the rich should pay more into the system, but that alone won't be enough to balance the budget. Oh, and things like social security the government has no business touching as the people who worked and poured money into the system are rightly entitled to their fair share.

Of course it doesn't help that cost of living expenses have gone way up over the past decade.
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The Real Michael, 12 Nov 2012 @ 7:19am

Re: Re: Note the difference
Why do ideas need to be patented anyway? They're just ideas -- intangibles.
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Anonymous Coward, 12 Nov 2012 @ 7:26am

Re: Note the difference
If you buy a hundred-foot lot in the middle of Manhattan, you�re not required to develop it.

Also, I'd like to point out that he's quite wrong about that. If a person or company squats too long on a valuable piece of real estate, some states will invoke the right of eminent domain to forcibly purchase the land in order to lease or sell it to a party interested in commercializing the land.
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Anonymous Coward, 12 Nov 2012 @ 8:00am

Re: Re:
as long as the extortionists are paying their taxes,

People tend to be consistent in their morality - or lack of it. So it is highly probable that the extortionists aren't paying all their taxes.
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Anonymous Coward, 12 Nov 2012 @ 8:19am

Re: Re: Note the difference
Yep. Just happened in my town, they declared eminent domain over a former Superfund site, sitting neglected and empty for almost 10 years while the owners whined no one would pay the ridiculous amount they thought it was worth. The property was an eyesore, a public safety hazard, an economic suckhole, and the owners got paid for it, just not what they wanted. They're suing, of course, while the property is now being developed into something the whole community can use, not to mention tax revenue and restored value to the surrounding properties.

Pennsylvania just passed a law making it *easier* to seize neglected properties that do little else but bring blight to a community. That law is primarily to do with properties with unpaid liens and taxes, though.
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Shmerl, 12 Nov 2012 @ 8:22am

Can't Intel, Google and co. smack this greedy idiot in the face? They have enough resources to fight him off, instead of settling.
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The eejit (profile), 12 Nov 2012 @ 9:01am

Re:
You can go back as far as Marathon in ancient Greece; it's a mere matter of what is doing the transmitting, whether it's a person, a mule or a pipe.
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avideogameplayer, 12 Nov 2012 @ 9:08am

This guy deserves to get botched slap by a RICO charge or two...
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avideogameplayer, 12 Nov 2012 @ 9:08am

This guy deserves to get bitched slap by a RICO charge or two...
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Anonymous Coward, 12 Nov 2012 @ 9:48am

Re: Oh, you want to be reasonable?
You spend post after post arguing that corporations are evil and Masnick is an idiot for supporting them... and now you think that unfairness should be acceptable?

Is your asshole also your mouth, out_of_the_ass? Because it sounds like you swallow after you speak.
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John Fenderson (profile), 12 Nov 2012 @ 11:47am

Re: Oh, you want to be reasonable?
capitalism is NOT reasonable. It's dog-eat-dog, grab all you can and to hell with everyone else.

Which is exactly why capitalism must be subject to regulation in order for it to be actually beneficial to people.
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ldne, 12 Nov 2012 @ 2:05pm

Re: Re: Note the difference
Not really, because ownership of the rental property doesn't revert to the public domain after 20 years. The idea behind patents is to give temporary monopoly in exchange for sharing how it's done with everyone so others can learn from it and use after the time's up. For your analogy to be accurate, the rental would have to become public property open to anyone capable of using it after 20 years.
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Frank L, 12 Nov 2012 @ 2:11pm

Endless lawsuits
Frivolous lawsuits, yet another violation of our rights. The gov�t constantly violates our rights.
They violate the 1st Amendment by caging protesters and banning books like �America Deceived II�.
They violate the 4th and 5th Amendment by allowing TSA to grope you.
They violate the entire Constitution by starting undeclared wars.
Impeach Obama.
Last link of �America Deceived II� before it is completely banned:
http://www.amazon.com/America-Deceived-II-Possession-interrogation/dp/1450257437
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ldne, 12 Nov 2012 @ 2:17pm

Re: Re: Note the difference
From the US Patent Office:

All utility patents which issue from applications filed on or after December 12, 1980 are subject to maintenance fees, which must be paid to maintain the patent in force. These fees are due 3 1/2, 7 1/2 and 11 1/2 years from the date of the original patent grant. Fee payments must include both patent and application numbers. If the fee is being paid for reissue, the application number required is the reissue application number. To access information on the current fees and costs associated with your patent, access the fee schedule .

There's $4,430 in maintenance fees spread out over the life of the patent in three stages. Doesn't sound like muchm but when your company's catalog numbers in the hundreds of thousands of patents, like many companies do, or you're an individual inventor trying to get going, it's actually a lot.
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John Fenderson (profile), 12 Nov 2012 @ 2:21pm

Re: Re: Note the difference
And a transfer fee for selling a patent?

Or, even better, make patents (and copyrights) nontransferable.
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ldne, 12 Nov 2012 @ 2:37pm

Re: Oh, you want to be reasonable?
Wow, what a load of drivel.

wealth has been re-distributed from poor and middle class to The Rich

It's called BUYING STUFF, duh. If people quit buying junk they don't need then guess what happens to the income stream of the rich guy who's selling it to them? That's what it all revolves around when you get down to it in a capitalistic society. That and the simple fact that wherever there is a system of any kind someone will come along and take advantage of it for their own benefit. Why do you think Communism and Socialism have been epic failures? Because their leadership attracted people desiring power and status and the people on the lower end figured out you can loaf along and still get paid.
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Jon Burdick, 12 Nov 2012 @ 3:57pm

working the patent
What of the legal requirement to "work" the patent? I don't think trolling and suing qualifies -- if a patent isn't worked it becomes abandoned last time I checked. But it sounds like what's really needed is for the patent to be declared invalid due to prior art. Many patents get declared invalid, why not this one? Must be that the business folk are too chicken to roll the dice. If so, that's thier business decision and the patent holder can't be faulted for it.
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TheLastCzarnian (profile), 12 Nov 2012 @ 9:12pm

Re: Re: Re: Note the difference
The city of St. Louis declared eminent domain on a very successful nightclub, Mississippi Nights. The sold the property to an investor who promised to build condos on the property. The city would have made much more money from residential property taxes than they got for the commercial property taxes from the nightclub.
The investor then sold the property to a gaming company. The gaming company razed the nightclub and built a parking lot.

Not a fuck was given, apparently.
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PT (profile), 13 Nov 2012 @ 9:48am

Re: Endless lawsuits
What, now the "banned book" spam has come to Techdirt?
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JJ, 13 Nov 2012 @ 5:41pm

isnt this sufficient prior art to tell them to kiss arses ( in use by govt and military nonetheless):

http://en.wikipedia.org/wiki/STU-III
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Tex Arcana (profile), 13 Nov 2012 @ 9:39pm

Re: Re: Re: Oh, you want to be reasonable?
Ending the "war" in Afghanistan will balance the budget all by itself; legalizing and taxing marijuana will take it the rest of the way. Balancing the tax code will put money back in the pockets of the people who most need it: the poor.

But, to quote "History of the World, Pt. 1": "FUCK THE POOR!"

:-(
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Tex Arcana (profile), 13 Nov 2012 @ 9:41pm

Re: Re: Oh, you want to be reasonable?
They are intrinsically evil: they are based on subjugating people into sameness and indoctrination, then performing bad acts to take the most money possible away from everyone while providing the worst product possible.

Just like the original corporations: churches.
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Niall (profile), 14 Nov 2012 @ 5:00am

Re: Re: Re: Re: Note the difference
And the parking charges probably make even more than all the other uses!
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Ryan, 17 Jan 2013 @ 9:49am

Re: Note the difference
They do... It's called rent.
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ppps (profile), 19 Aug 2013 @ 6:02pm

If Apple or Google had a case, they'd go to court
I find the comment that the patent was never proven valid in court rather astonishing. It was shown valid by the US Patent and Trademark Office. Then all those "innovator" companies had their lawyers tear it apart, and they couldn't find any basis to attack it, so they settled, rather than go to court. Do you think they couldn't afford to go to court? Apple? Google? Believe me, patents are always challenged if their is any hope of finding them invalid. Every big company that paid a royalty first looked hard and long to see if they had any hope of getting out of it. The inventor just designed and figured out how to do it, why should he have to personally make the devices himself to get paid. By the way, Apple does't make its own inventions, it hires Chinese companies to actually make them, and if Korean companies do, they sue. Big companies steal inventions. A lot of technology really gets developed by small independent guys who try to sell to the patent thieves, and sometimes the thieves have to pay.
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alister a., 26 Nov 2013 @ 4:36am

Re: Re:
hahahaha! epic comment. quite true.
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Todd, 26 Nov 2013 @ 8:02am

how about imminent domain?
If you have a plot of land in Manhattan and you do nothing with it you are at risk of having the property seized (you recieve "fair market value" compensation for it) and the property can be used for the public good. In some places it is being used to hand prime real estate to developers, but I digress.

This seems like ideal patent for seizure for the public good. Since it is a junk patent, it is worth approximately the cost of the paper it is printed on.
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